Donthala Purnachandra Rao, G Konduru V. Assistant Commissioner of Income Tax, Circle-1(1), , VIJawada

ITA 175/VIZ/2018

AI Insights

The case involves Donthala Purnachandra Rao, the proprietor of Sravani Constructions, who appealed against the order of the Commissioner of Income Tax (Appeals), Vijayawada. The appeal arose from an assessment order under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2015-16, where the Assessing Officer rejected the books of accounts and estimated the income at 12.5% of gross receipts due to non-verifiable expenses. The CIT(A) reduced this to 8% based on a precedent from the ITAT, Visakhapatnam. The assessee contested the estimation percentage and the rejection of books of accounts.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135739 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 08-05-2018
• Other Referred Cases: Hon'ble ITAT, Visakhapatnam decision in the assessee's own case for the AY 2009-10
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice
• Section: 144; 143(3); 143(2); 44AB; 145(3)

Judgement Text

आयकरअपीलȣयअͬधकरण, ͪवशाखापटणमपीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įीदुåवूǽआरएलरेɬडी, ÛयाǓयकसदèयएवंĮीएसबालाकृçणन, लेखासदèयकेसम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No.175/Viz/2018 (Ǔनधा[रणवष[/ Assessment Year : 2015-16) DonthalaPurnachandra Rao, Prop. Sravani Constructions, D.No. 1-84, Kattubadipalem, G. Konduru-521228. PAN: AFFPD 8153 H Vs. Assistant Commissioner of Income Tax, Circle-1(1)m, Vijayawada. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸकȧओरसे/ Appellant by : Sri ASRSS Sivaprasad Ĥ×याथȸकȧओरसे/ Respondent by : Sri ON Hari Prasada Rao, Sr. AR सुनवाईकȧतारȣख/ Date of Hearing : 31/01/2023 घोषणाकȧतारȣख/Date of Pronouncement : 16/02/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), Vijayawada [Ld. CIT(A)] in ITA No. 10099/CIT(A)/VJA/2016-17, dated 17/3/2018 arising 2 out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] dated 12/12/2017 for the AY 2015-16. 2. The assessee is an individual and proprietor of M/s. Sravani Constructions and engaged in the business of Civil contracts, filed his return of income admitting a total income of Rs. 43,34,610/- for the AY 2015-16. Subsequently, the case was selected for limited scrutiny under CASS for the reason to examine “large other expenses claimed in the P & L Account”. Accordingly, notice U/s. 143(2) of the Act was served on 2/8/2016. In response to the notice, the assessee’s Authorized Representative (AR) appeared and filed the required details. Based on the discussions with the AR and the submissions made by the assessee, the Ld. AO directed the Income Tax Inspectors [ITIs] to examine the genuinity of the expenses and submit a report. The Inspectors submitted a report wherein it was submitted that the assessee has not produced vouchers or verifiable details for the following major expenses: i. Aggregate purchases Rs. 55,22,790 ii. Bitumen Transport Expenses Rs. 4,25,330 iii. Brick Purchases Rs. 9,60,200 iv. Concrete Charges Rs. 1,37,194 3 v. Earth Work Charges Rs. 6,73,223 3. The Ld. AO considered the report of the Inspectors and provided another opportunity to the assessee to produce complete details for all the expenses on 15/11/2017. The Ld. AO observed that the assessee could not produce the bills, vouchers or any other details with regard to the above expenses. Therefore, the Ld. AO proposed to reject the books of account and estimated the income @ 12.5% of the gross receipts and called for the objections from the assessee on or before 30/11/2017. Since the assessee has not filed any objections, the Ld. AO rejected the books of accounts U/s. 145(3) of the Act and estimated the income @ 12.5% of gross receipts at Rs. 88,18,049/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld.CIT(A) the only contention of the assessee is with respect to the estimation of income @ 12.5%. To support his ground before Ld.CIT(A), the assessee produced a copy of the Hon’ble ITAT, Visakhapatnam decision in the assessee’s own case for the AY 2009-10. The assessee has not contested before the Ld. CIT(A) regarding the non-verification of the books of accounts of the assessee by the Ld. AO. The assessee has merely pleaded before the Ld. CIT(A) to estimate the 4 income @ 8% instead of 12.5% estimated by the Ld. AO on gross receipts based on the ITAT decision in assessee’s own case for earlier AY. Accordingly, the Ld. CIT(A) considered the submissions of the assessee and partly allowed the appeal and directed the Ld. AO to calculate the income @ 8% on gross receipts. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 4. The assessee has raised the following grounds of appeal: “1. The order made by the Ld. CIT(A), Vijayawada is bad in law, arbitrary, contrary to the provisions of law and against the principles of natural justice. 2. On the f acts and circumstances of the case and in law, the Ld. CIT(A), Vijayawada erred in directing the Assessing Off icer to calculate the income at 8% on the Gross Receipts since the appellant maintained the books of accounts regularly. 3. The appellant submits that it was mentioned in the order of the Ld.AO and verif ication report of the inspectors that verif iable details were not produced f or certain expenses but at no point of time the genuineness of the expenditure is neither commented nor f ound anything on record about the incorrectness of the expenditure. Rejection of books of accounts and resorting to estimation of income is not correct since the appellant maintained books of accounts, got the m audited and produced the same f or verif ication during the proceedings. 4. The appellant submits that there is no clarity in the Assessment Order with regard to the section under which the assess ment is completed since it was mentioned on the 1 s t page (item No.13) of the Assessment Order that the assessment is made U/s. 143(3) of Income Tax Act, 1961 whereas paragraphs 5 4.2, 4.3 & 4.4 of the assessment order state that the assessment is completed U/s. 144 of the IT Act, 1961. This is to f urther submit that depreciation ought to have been allowed f rom the income assessed. 5. For these reasons and those which may be urged at the time of hearing of appeal and on the f acts and circumstances of the case, the order passed by the CIT(A) to estimate income at 8% on gross receipts may be modif ied by accepting the income returned. 6. The appellant craves leave to add, alter, amend, modify, substitute, delete and / or rescind all or any of the grounds of appeal on or bef ore the f inal hearing, if the necessity so arises.” 5. At the outset, the Ld. AR argued that the assessee is regularly maintaining the books of accounts and was subjected to audit U/s. 44AB of the Act and hence rejection of books of accounts by the Ld. AO is not valid in law. The Ld. AR further argued that the Ld. AO has passed the assessment order U/s. 143(3) of the Act whereas the assessment is completed U/s. 144 of the Act. The Ld. AR also submitted that the Ld. CIT(A) has erred in calculating the income @ 8% on the gross receipts. Per contra, the Ld. DR referred to para 4.2 of the order of the Ld. AO wherein the Ld. AO has clearly mentioned about the proposal to reject the books of accounts and to estimate the income @ 12.5% on the gross receipts. The Ld. DR further submitted that the Ld. AO has observed that the assessee has not 6 raised any objections to the above proposal of the Ld. AO. The Ld. DR further submitted that the assessee has not produced bills / confirmations before the Ld. AO and has produced only in the month of November, 2022. He therefore pleaded that the orders of the Ld. Revenue Authorities be upheld. 6. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is seen from the records, that the Ld. AR has not raised the issue of rejection of books of accounts before the Ld. CIT(A). The Ld. AR has only pleaded before the Ld. CIT(A) to estimate the income @ 8% on the gross receipts as held by the Hon’ble ITAT, Visakhapatnam in ITA No. 105/Viz/2013, dated 27/11/2015 in the assessee’s own case for the AY 2009-10. None of the above grounds raised before us was contested before the Ld. CIT(A). It is also noted that after pleading for estimation of 8% on the gross receipts as income against 12.5% estimated by the Ld. AO, the assessee contested before us that the Ld. CIT(A) has erred in directing the Ld. AO to calculate the income @ 8% on the gross receipts. Further, as submitted by the Ld. DR, we observe that the confirmation of the accounts were obtained on 26/11/2022 only from Sri Maheswari Stone Crusher. In view of 7 the afterthought of the assessee to contest the rejection of books of accounts before us inspite of accepting the 8% on gross receipts allowed by the Ld. CIT(A), following the ITAT, Visakhapatnam order in the assessee’s own case. We are also of the considered view that merely not mentioning section 144 by the Ld.AO cannot invalidate findings nor render the assessment void ab initio. We also are of the opinion that since the assessee has not produced any details / confirmations before the Ld. Revenue Authorities before the completion of proceedings, and also not contested any of the above grounds before the Ld. CIT(A). Even before us, the assessee has not placed any satisfactory evidence to establish his case except filing of one confirmation letter dated 26/11/2022, which is an afterthought. We are therefore inclined to uphold the order of the Ld. CIT(A) and hence no interference is required in the order of the Ld. CIT(A). 7. In the result, appeal of the assessee is dismissed. Pronounced in the open Court on the 16 th February, 2023. Sd/- Sd/- (दुåवूǽआर.एलरेɬडी) (एसबालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखासदèय/ACCOUNTANT MEMBER Dated : 16.02.2023 8 OKK - SPS आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee–Donthala Purnachandra Rao, D.No.1-84, Katuubadipalem, G. Konduru-521228, Krishna District. 2. राजèव/The Revenue –Assistant Commissioner of Income Tax, Circle- 1(1), Vijayawada. 3. The Principal Commissioner of Income Tax, Vijayawada. 4. आयकरआयुÈत (अपील)/ The Commissioner of Income Tax (Appeals), Vijayawada. 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण, ͪवशाखापटणम/ DR,ITAT, Visakhapatnam 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam